Medtronic says it is 'two to three years' ahead of competition on artificial pancreas

Medtronic ($MDT) is just a few days away from detailing pivotal data for its hybrid Closed Loop System at the American Diabetes Association conference. That's expected to be followed by a PMA submission in June, with an approval anticipated to follow in the spring.

"By the end of this month, the end of June, we are going to be submitting the PMA for the world' s first hybrid closed loop system, which we feel will put us somewhere in the neighborhood of at least two years to three years ahead of where the competition is going to be," said Hooman Hakami, EVP and group president of Medtronic Diabetes, at the company's recent investor day.

But the medical device giant doesn't plan to stop at being the first to bring an artificial pancreas system to market. Ultimately, it's looking to create a fully closed loop system. The current hybrid system relies upon two separate products, a continuous glucose monitor and an insulin pump that have been combined to work together to automatically regulate insulin delivery based on real-time blood glucose data.

"We remain completely committed to a fully Closed Loop System," said Hakami. "We're not there yet, but every single day we are in fact getting closer."

The next iteration will be based on a new sensor, Harmony 1, that's the next-gen after the Enlite 3 that's used in the 670G integrated hybrid closed loop system that's slated to be the subject of a PMA submission later this month. Harmony 1 is expected to be worn for 10 days, up from 7 with the current system. It's also expected to be more accurate, with a maximum of a 10% mean absolute relative difference (MARD).

Medtronic expects that a closed loop system based on Harmony 1 would require only once-daily finger stick calibration, down from the twice-daily required for most continuous glucose monitors. The company expects to have this next-gen closed loop system in a pivotal trial in less than a year, with an FDA submission to follow that will require a 12-month review cycle.

But that's just the beginning--Medtronic expects to have several rapid waves of innovation in its diabetes business over the next 5 years. It recently rolled out a partnership with Qualcomm to develop a single-use, inexpensive continuous blood glucose sensor for Type 2 diabetics.

"What this translates to is really an explosion of innovation across all of these business units, where we are going to be launching more new products in the next 5 years than we have in the last 15 years," concluded Hakami.

In the bigger picture, Medtronic committed to offering consistent, double-digit constant currency EPS growth, which it expects will offer shareholder returns in the low double-digit to mid-teens. It also expects to deliver $40 billion in free cash flow over the next 5 years.

It expects three major themes to drive its growth in this longer term time frame: therapy innovation, globalization and economic value.